How to Start an LLC - Avoid Mistake While Incorporating Your Business

How to start an LLC? Many people do not know how to start an LLC, though many would prefer to have more control over their business rather than be limited by laws that are hard to understand. An LLC is a way for people to show Limited Liability Company status to the world. To begin and run an LLC within most states, all that is needed is to pay a simple fee, file the right paperwork, obtain any other business permits or licenses, and keep up compliance on a yearly or quarterly basis.

How to Start an LLC

How to start an LLC For Your Business

How to start an LLC has changed over time because of changes in the law. One of the first forms of LLCs was the "pass-through" business structure. This business structure gave business owners protection from creditors while still maintaining some financial anonymity. The main problem with this type of business structure was that it required large amounts of cash flow to fund the LLC's operations. The small business owners did not have enough credit or collateral to allow them to raise venture capital on their own.

Another type of LLCs was the "sole proprietorship" or "Sole-proprietorship." This type of arrangement allowed smaller business owners to continue to manage their business affairs after they filed their Articles of Organization with the state. This arrangement was good for the small business owner who had limited business skills but who desired to remain in control of their business. They could hire a lawyer to help them draft an operating agreement, purchase the necessary permits, and manage their LLC without being required to come up with large amounts of cash.

How To Start An LLC - The Types Of LLCs

Now there are two other types of LLCs. An "IRS-only" operating agreement was created by the IRS in 2021. Unlike the sole proprietorship or S-proprietorship, an "IRS-only" LLC does not require the permission of shareholders to adopt a new operating agreement. In an "IRS-only" LLC, the proprietor is the only one permitted to change the LLC's operating agreement. To protect the rights of others, all LLCs should have an Employer Identification Number or EIN, also known as an "intj" or "Registered Agent" number.

How To Start An LLC - Choosing A Business Name 

The next step in how to start an LLC is to choose your business name. The best idea is to select a business name that will easily be remembered by customers and potential customers when they need your products or services. Choose a business name based on what your business idea is. For instance, if you are a plumber, you might want to get started with a name such as "P.O. Box."

There are many different benefits to an "IRS-only" LLC such as the ability to limit personal asset protection liability, avoiding double taxation, and the ability to save or retain more money for retirement and spending. However, the key takeaway here is to understand how to avoid choosing an "incorporated" or "professional corporation" when structuring your business structure. You want to be sure that your LLC is not mistaken for an "in-between" business structure or an "incorporated business entity."

How To Start An LLC - What is an "incorporated business entity?" 

An "in-between" business entity would include any business which has its separate legal structure (including a partnership) from which it receives tax immunity. In other words, an "incorporated business entity" would be any business entity that has a separate legal structure other than an "incorporated" one. So, in this article, we specifically are discussing how to start an LLC. In general, small business owners who wish to protect their income and shield their liability may choose to incorporate their LLC instead of forming a sole proprietorship or a partnership.


So, in conclusion, the key takeaway here is to know how to start an LLC to avoid confusion with all of the potential legal issues that can arise. Next time you're reading an article about how to start an LLC, make sure you understand that you can't pick an "incorporated" or "professional corporation" when structuring your business structure because an "in-between" type of entity is simply not considered an "LLC." So, make sure you choose the right kind of entity structure for you. Now that you have the basics of how to start an LLC, take action now by finding an online small business attorney who can help you set up your LLC, submit your articles of organization, and set up the necessary tax forms.